2003 (12) TMI 304 - AT - Income Tax

Summary

Issues:
- Penalty cancellation under section 271D of the IT Act, 1961
- Penalty cancellation under section 271E of the IT Act, 1961

Analysis:

Issue 1: Penalty cancellation under section 271D of the IT Act, 1961
The appellant received cash deposits and repaid in cash, which contravened the provisions of sections 269SS and 269T. The Assessing Officer (AO) imposed a penalty under section 271D. However, the CIT(A) canceled the penalty, stating that the default was technical, and the transactions were not inherently wrong. The appellant had accepted/repaid cash exceeding Rs. 20,000, but the nature of the transactions with certain individuals, like an ex-partner and an agriculturist, indicated a long-standing relationship and running accounts. The CIT(A) found no justification for imposing penalties for technical defaults in such circumstances. The CIT(A) observed that the penalties under sections 271E and 271D were imposed for the same default, leading to the cancellation of penalties.

Issue 2: Penalty cancellation under section 271E of the IT Act, 1961
Regarding the penalty under section 271E, the appellant's counsel argued that the repayments had valid reasons, such as repayment to an ex-partner out of remaining capital, urgent cash payment for medical treatment, and repayment of trust money for education expenses. The counsel contended that these repayments were made under bona fide belief and due to reasonable causes, thus not warranting penalties. The CIT(A) agreed with the counsel's arguments, citing various decisions and held that the repayments did not contravene the provisions of section 269T. The CIT(A) confirmed the cancellation of penalties under section 271E based on the circumstances and justifications provided.

In conclusion, the ITAT Jodhpur upheld the CIT(A)'s decision to cancel the penalties under sections 271D and 271E of the IT Act, 1961. The tribunal found the transactions to be based on trust, long-standing relationships, and reasonable causes, thereby justifying the cancellation of penalties imposed by the AO. The judgments cited by the appellant's counsel supported the argument that the defaults were technical and did not merit penalties, leading to the dismissal of the Revenue's appeals.